If you deposit a large sum of money in the bank, what do you do to avoid problems with the IRS?

Question

What do you do to make sure that you are keeping the money legally? For example, do you file it on your taxes, and if you do, are you required to show proof of where it came from or could it just be filed as an asset? What else might you need to do?

Answer 1

pay the taxes upfront and be done with it

Answer 2

All you need do is report the income on your tax return for the current year. The banks fill out an IRS form if the amount is over $10.000 but other wise you do not need to prove a thing to anybody unless they ask. If it was a million cash dollars then maybe somebody asks but other than the form to the IRS ther bank will take your money.

And if you report it all and pay the tax on it as you receive it (not just at the end of then year, IRS wants their piece of it every three months {estimated tax payments})

The answer is YES ...to ...are you required to show proof of where it came from? If it is electronic money then the source is known and the issuing corporation or individual will issue you a 1099 or K1 or a brokers balance sheet of your earnings.
..If it is cash then it is other income and if from your business then fill out a Schedule C with your 1040 for the year.
.Whatever it is, inheritance, gambling winnings, crime, or you found it on land or the bottom of the ocean ...the IRS has a place for you to record it.

good luck ...

Answer 3

The IRS could care less how you got the money as long as you pay the tax. If it ill-gotten gain you will have problems if you deposit it in the bank in large sums as other federal agencies are likely to check. I would not wish to tell you how to handle the money if you came by it in any fashion that is in violation of the law lest I join you in jail. If you came by the money legally you might wish to talk to a tax professional as there may be means that would be helpful in avoiding some of the tax.

Answer 4

Cash transactions of $10,000 or more are automatically reported to the IRS. So are "suspicious transactions" of $9,999.99 so don't try it!

In general, claiming the money as income and paying the necessary tax satisfies your responsibility to the IRS. It's really none of their business where the money came from and unless you're under suspicion for tax evasion, the Treasury Department isn't coming after you. Of course, the Attorney General's Office might be interested in where you got the money, but that's a different balliwick.

Strangely enough, most criminals (drug dealers, mobsters, etc.) are busted for tax evasion, not for the other crimes they committed (hence the fear of the G-Men coming after you). Many large purchases (including automobiles) are reported under your social security number. Too many fancy purchases and not enough reported income triggers the investigation. That's where money laundering comes into the picture. It turns things like drug money into seemingly legitimate income.

Answer 5

Everyone who said large deposits are reported to the IRS misunderstands the 'Suspicious Activity Report'. Large transactions (deposits, withdraws, or transfers) are reported the the Treasury Department to assist in detecting money laundering and other financial crimes. The IRS does not receive to reports. If the money is income, the source of the income should report to the IRS using the appropriate form for the type of income involved.

Answer 6

You need to be able to prove you got the money legally.